Tyson Foods to build $320 million poultry complex in Kansas

by Kim Souza (ksouza@talkbusiness.net) 529 views 

Tyson Foods said Tuesday (Sept. 5) it will spend $320 million to construct a new poultry processing plant and supporting complex in eastern Kansas near the city of Tonganoxie, which is about halfway between Topeka and Kansas City. The plant will bring about 1,600 jobs to the area when it comes online in mid-2019.

The plant is Tyson Foods’ answer to what it says is under capacity for fresh chicken (prepackaged tray packs) sold in retail grocery stores across the country.

“More people want fresh food and as one of the world’s leading protein companies, we’re well-positioned to provide it,” said Tom Hayes, president and CEO of Tyson Foods. “We believe this new operation, which will incorporate the latest production technology, will enable us to meet the sustained growth in consumer demand for fresh chicken.”

This is Tyson Foods’ first new poultry plant to be constructed since 1996, according to corporate spokesman Worth Sparkman. The poultry plant will be capable of processing 1.25 million birds per week, increasing Tyson Foods’ overall production capacity. The payroll and payments to farmers from the new operation, along with its purchase of grain and utilities, is expected to generate an annual economic benefit of $150 million to the state of Kansas.

“Kansas will be an outstanding home for this Tyson complex,” said Kansas Gov. Sam Brownback. “Growing Kansas means we must grow the food and agriculture sector which accounts for nearly 45% of the state’s economy. The far-reaching impact of this development will be felt by farmers, ranchers, agribusinesses and communities throughout eastern Kansas. This is a step in the right direction to further diversify and grow our state’s economy.”

While Tyson Foods operates two beef packing and two prepared foods processing plants in Kansas, this is the company’s first poultry processing plant in the state. Hayes recently told the media during the company’s last earnings call the company was looking at expanding capacity for fresh chicken given the demand. When asked if any of that expanded capacity would be in Arkansas, he said the Green Forest plant expansion — slated to come online this year — has already sold out the added capacity. Last month, Tyson Foods announced an $84 million plant expansion in Union City, Tenn., expected to come online late next year. The Union City plant also processes fresh chicken packaged for retail grocery sales.

Doug Ramsey, group president of poultry for Tyson Foods, said the company chose eastern Kansas for the new facility because of its close proximity to grain and adequate labor, in addition to being centrally located for easy transport to customers nationwide.

Tyson said it will recruit growers to supply the chickens for the new plant over the next 18 months. A new feedmill will employ around a dozen workers once operational. Farmers and ranchers interested in raising chickens for the new poultry complex can find more information at this link.

Tyson Foods said it employs about 5,700 in Kansas with annual payroll of more than $210 million. Last year, the company also paid Kansas cattle suppliers more than $2 billion and hog suppliers more than $1.3 million. The company estimates its total statewide annual impact for fiscal 2016, including grain purchases, utilities, property taxes and charitable contributions to be more than $2.4 billion.

A report by Watt Poultry earlier year indicated chicken continues to be popular with retail grocery shoppers, with 96% fresh meat household penetration. Research done by Food Marketing Institute also found 39% more food protein items are being sold today than four years ago. While Tyson Foods and other chicken processors such as Pilgrim’s Pride and Sanderson Farms have said the demand for fresh chicken at retail is growing, meat alternatives are gaining some popularity with Millennials.

Aside from Tyson Foods’ expanded capacity, Sanderson Farms, Wayne Farms and other regional processors have also added production lines in the past couple of years. The investments are not made for the short term, but for the long-term, the data supporting the decisions remains somewhat mixed.

The Meat Institute study notes up to 60% of millennials believe protein goals do not require meat. But someone is eating more chicken, as Watt Poultry USA reports sales of meat and poultry rose 7% in dollars last year and 9% in volume. The biggest growth came in the better-for-you products such as antibiotic free and fresh.

The U.S. Department of Agriculture is projecting that Americans will eat nearly 92 pounds of chicken per person, topping last year’s record of 91 pounds. Tom Super, National Chicken Council’s senior vice president of communications, said he believed chicken was still extremely popular, “The data shows that chicken is still top of mind for consumers,” he said.

Tyson Foods recognizes that non-meat proteins are a growing consumer class which is why the company invested in Beyond Meat, taking a 5% stake in the plant-protein company. Tyson Foods also launched a venture capital fund worth $150 million to invest in startups that develop plant-based meat alternative earlier this year, and Hayes made it clear Tyson Foods is trying to cover all the protein bases.